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UPDATED: Feb 28, 2012
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The government offers a variety of services to Americans when it comes to home financing. Government loans are meant to bridge the business gap between borrower and lender by removing the profit-seeking aspect, and instead by focusing on the service itself. As a result, government loans usually offer more consumer-friendly terms and lower interest rates.
[loansform]Take for instance VA loans, which are a type of financing that is offered to service members and their spouses. VA home loans allow former service members to obtain property financing with no down payment and no private mortgage insurance—a perk the general public isn’t given with a traditional line of credit for property purchase.
To be eligible for a VA loan, a borrower must be a veteran, in active duty, a reservist, or a National Guard member. Surviving spouses of service members who were killed in active duty, as a result of a service-related injury, or of a member who declared missing in action, captured, or detained can also be eligible for a VA loan.
Likewise, FHA mortgage loans, which are available to the general public, often grant borrowers low interest rate home loans at small down payments with low credit score requirements. Additionally, this type of government-sponsored property financing offers many tools to help borrowers avoid foreclosure if they begin experiencing financial trouble. To qualify for an FHA home loan, borrowers must be eligible for 96.5 percent of entire financing amount, select an FHA-approved property, and meet minimum credit requirements.
While government loans require certain criteria to be met before one can take them out, they are often a better, safer, and more profitable means of borrowing money.